Meaning Of Words And Phrases In Your Mortgage Documents

No doubt about it, mortgage documents are often full of words and phrases you may find really hard to understand. But we have compiled a list to help you out.

As a matter of fact, if care is not taken, one might end up filling out mortgage application forms with the wrong information.

Contents

#1). Annual Percentage Rate (APR)#2). Arrangement fee or product fee #3). Capital #4). Building survey #5). Completion #6). Disbursement #7). Contract #8). Early redemption fee or early repayment charge #9). Conveyance fee #10). Equity #11). Credit Scoring #12). Endowment #13). Exchange of contracts #14). Financial Services Compensation Scheme (FSCS)#15). Financial Ombudsman Service #16). Financial Service Authority (FSA)#17). Freehold #18). Higher lending charge #19). Interest #20). Key Facts Illustration (KFI)#21). Land Registry fee #22). Lease #23). Loan-to-value #24). Legal fees #25). Lump-sum reduction #26). Mortgage deed #27). Mortgage exit fee (often referred to as a sealing fee)#28). Mortgage term #29). Offer of advance #30). Redemption #31). Repayments #32). Security #33). Stamp duty #34). Title deeds #35). Valuation

When you are applying for a mortgage, you will be given some mortgage documents that explain your mortgage terms and conditions as well as a form you will be required to fill out.

You will also have the opportunity to understand how your lender operates when it comes to mortgage lending. The problem is that you might find some of the words and phrases used in your mortgage documents difficult to understand.

In this jargon buster, I try to explain some of the words and phrases that are often used in mortgage documents to help you understand your mortgage terms and conditions.

#1). Annual Percentage Rate (APR)

The APR takes account of the interest rate you will pay, how you will repay the mortgage, the mortgage term, and any other charges. You can use this information to compare different mortgages.

#2). Arrangement fee or product fee

This is the fee that you pay to the lender for arranging the mortgage.

#3). Capital

This is the amount of money you borrow and pay interest on.

#4). Building survey

Building survey is the survey a qualified surveyor carries out to spot faults and potential problems in the property you are buying.

#5). Completion

This is when you become the legal owner of your new property.

#6). Disbursement

These are charges like Stamp Duty and Land Registry fees that are usually paid to the conveyancer or solicitor.

#7). Contract

This is the legal document that, when signed, makes you the new owner of the property.

#8). Early redemption fee or early repayment charge

This is a fee that you might be charged if you pay your mortgage back early or move to another lender.

#9). Conveyance fee

This is the fee charged by a solicitor or licensed conveyancer for managing the legal paperwork involved in buying and selling a property.

#10). Equity

This is the total value of your property minus the amount of the mortgage. So if your house is worth £120,000 and you have a mortgage of £100,000, you have equity of £20,000.

#11). Credit Scoring

This is a search of your borrowing record which is often called a credit history. A lender will usually check your credit history or credit rating before deciding whether to lend you money.

#12). Endowment

This is an investment plan that you usually pay into each month and that pays out a lump sum at the end of a set period. It is usually used for interest-only mortgages.

#13). Exchange of contracts

This is when you contracts are exchanged with the person selling the property and you are committed to buying the property.

#14). Financial Services Compensation Scheme (FSCS)

The FSCS can pay compensation to customers if a company cannot pay a claim against it.

#15). Financial Ombudsman Service

This is the official independent complaints scheme. It works to sort out complaints between consumers and businesses which provide financial services.

#16). Financial Service Authority (FSA)

The FSA looks after financial services and protects your rights as a consumer. It has been carrying out this role with a mortgage since 2004. Anyone who lends you money needs FSA authorization and must follow their rules when dealing with a customer.

#17). Freehold

This is when you own a property and the land it stands on.

#18). Higher lending charge

If you borrow a high percentage of the price of the property, say 90%, it’s seen as a higher risk than usual for a lender. So you might have to pay this fee.

#19). Interest

This is the money you are charged for borrowing. Interest can be variable (go up and down) or can be fixed.

#20). Key Facts Illustration (KFI)

The KFI is important information for you. It’s set out in a standard way so you can compare a financial service, product, and costs from different providers. Make sure you get them and read them.

#21). Land Registry fee

This is a fee you pay to the Land Registry to register your ownership of the property.

#22). Lease

This is the legal contract that makes a person who buys a leasehold property the legal owner for a certain amount of time. A leaseholder owns the property for that time, but they don’t own the land it stands on.

#23). Loan-to-value

This is usually the ration between the size of the loan you are looking for and the mortgage lender’s valuation of the property.

#24). Legal fees

These are the fees you pay to a solicitor for their services. You will need a solicitor to help you buy or sell a property.

#25). Lump-sum reduction

A lump sum you can pay on top of what you pay each month to reduce your mortgage.

#26). Mortgage deed

The legal agreement that gives the lender rights to your property.

#27). Mortgage exit fee (often referred to as a sealing fee)

A charge at the end of your mortgage, when the property is released to you.

#28). Mortgage term

The length of time you will be paying back your mortgage.

#29). Offer of advance

This is an offer by a mortgage lender to provide you with a mortgage.

#30). Redemption

Paying off your mortgage in full.

#31). Repayments

The amount you have to pay back to the lender (usually monthly) when you borrow the money.

#32). Security

When you take out a mortgage, the security is the property. If you don’t pay your mortgage payments on time, the lender has the right to repossess the property. Also, the lender can sell the property to recover the debt.